Recently, a friend asked me how to choose airline stocks, and I realized that many people still don’t really understand this sector. Rather than viewing airline stocks as a simple investment target, it’s more accurate to see them as a reflection of the business cycle—especially when the global economy picks back up, this type of stock often shows remarkable flexibility.

Let’s start with the basic logic behind airline stocks. Airlines’ revenue mainly comes from passenger and cargo services, but these earnings highly depend on the health of the global economy, fluctuations in oil prices, and the interest-rate environment. You’ll find that when the economy is doing well, oil prices are falling, and interest rates are stable, airline stocks are more likely to take off; conversely, they tend to fall when conditions worsen. That’s also why some people say airline stocks represent “highly elastic growth”—their gains during periods of recovery can be astonishing, but their declines during downturns can also be significant.

Now, today’s leading airline companies don’t survive on ticket sales alone. Modern airlines have diversified revenue streams. In addition to base fares, they generate non-fare income such as baggage fees, seat upgrades, mileage programs, cargo operations, and rewards from co-branded credit cards. This is actually crucial, because it gives airlines some buffer even in off-season periods.

When it comes to specific investment targets, in the U.S. market, major players like Delta Air Lines (DAL) and United Airlines (UAL) have performed well this year. Delta Air Lines is especially closely watched, because it has advantages in business travelers and the proportion of international routes, and it carries out fuel hedging through its own refining operations, giving it relatively strong cost-control capabilities. According to Morgan Stanley’s analysis, Delta Air Lines is listed as a top choice because of its higher share of premium customers and stable growth performance verified by results. Copa Airlines (CPA), as the leading airline stock in Latin America, has also shown solid performance in recent years. In the second quarter, net profit rose 25% year over year, and operational efficiency continues to improve. Ryanair (RYAAY), the leader among Europe’s low-cost carriers, is actively pushing forward its expansion plans—aiming to increase annual passenger volume from 200 million to 300 million by 2034.

In Taiwan’s market, EVA Air (2618) and China Airlines (2610) are the two major leaders. As a five-star certified airline, EVA Air has seen international route capacity grow 28% year over year, and its fleet is highly modernized. China Airlines, meanwhile, has formed a complete setup that combines full-service and low-cost offerings through its subsidiaries, Mandarin Airlines and Tigerair Taiwan, with a third-quarter load factor of 86.9%. Although StarLux Airlines (2646) is relatively new, its performance has also been impressive. Its stock price is up about 18% compared with the start of the year, and it is actively expanding international routes.

There are several key points to keep in mind when investing in airline stocks. First, the airline industry is a typical cyclical sector, and the best buying opportunities are usually when the economic cycle is nearing its end but has not yet turned. Second, airlines generally have high debt levels, so when the cycle reverses or interest rates rise, financial pressure can be very large—so you should choose companies with sufficient cash flow and strong risk-resilience. Third, diversification is important. Airline stocks’ performance in different regions can vary depending on local economic conditions.

According to estimates by the International Air Transport Association, global passenger numbers have officially surpassed pre-pandemic levels in 2025, and by 2040, demand for air travel is expected to double to 8 billion passenger trips, with an average annual growth rate of 3.4%. Even Buffett, who has traditionally been skeptical about airline stocks, now also has major holdings in Delta, United, and United Airlines. This is enough to show the market’s optimistic attitude toward the future prospects of leading airline companies.

However, you also need to clearly recognize the risks—surging oil prices, geopolitical crises, and weather issues can all deliver black swan shocks to airline stocks. Moreover, once the airline industry’s three major costs (fuel, labor, and maintenance) rise, it is difficult to adjust quickly. So if you’re an investor with a lower tolerance for risk, you may need to be more cautious; but if you believe in a business-cycle recovery and can withstand volatility, then this may actually be a good time to enter.